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We have all heard those sad stories of unfortunate people loosing their bitcoins. From online wallet hacks to desktop trojans watching for passphrases – the world of cryptocurrency storage is only in its early stages. A realistic strategy is always needed when securing your digital assets – both for long term storage and for everyday use.

I strongly believe that choosing a good wallet is the most important part of learning how to use bitcoin. Using a safe storage solution is still not an easy task. In fact, the most convenient wallet systems (web-wallets) are usually the most unsafe. Thankfully there are many extremely safe options for holding your bitcoins. Throughout this page I’ll help you choose the best wallet for keeping your digital currency safe.

To keep things simple: remember that the private keys of your wallet are what enables sending the coins elsewhere. The safest wallets are those where the private keys are kept hidden away from the outside world to see.

Use the following table to quickly compare the advantages and disadvantages of each wallet type:

Web-Wallets

Online web-wallets are websites or even online exchanges that allow storage. As I mentioned above, this is the least secure option as it usually involves leaving the management of your private keys to a web server. Web servers are prone to hacking, and users must also trust the online wallet operators. It is however a really convenient way to keep a couple dollars worth of bitcoin online for quick and easy payments. If you have large amounts, then never keep it all in a web-wallet.

Here are the best web-wallets:

Each of the best sites to buy bitcoin have free online web wallets. Note that these are custodial web-wallets (the exchange operators own & manage all private keys on your behalf).

Blockchain.info – Simple user interface, no ID verification needed to use it. HQ based in Luxembourg

Greenaddress – Synced wallet that works across your devices. Browser extension and smartphone.

Coinbase standard wallet (insured storage) – Super popular, based in US. No fees to send BTC to other Coinbase wallets.

Mobile Wallets

A mobile or smartphone wallet is, as the name suggests, a bitcoin wallet on your smartphone. I love mobile wallets because it is really easy to scan QR codes with my phone’s camera to make quick payments to friends and merchants. Nomenclatures may vary, but I definitely consider mobile wallets to be as unsafe as web-wallets in terms of private key security. I say this because most mobile apps automatically update by themselves. If a hacker got access to the developer’s Itunes/GooglePlay account then they could potentially infect and steal millions of users wallets as their next update gets pushed through. Nevertheless, this type of wallet is great for having small amounts ready to pay.

The top mobile wallets for iOS and Android are:

Breadwallet – simplest wallet for iPhone and more recently available on Android

Desktop Wallets

Desktop wallets are apps installed on a desktop computer or laptop. Many people store significant proportions of their bitcoins in desktop wallets as these are much safer than web or mobile wallets. If you asked me a few years ago, I would have said that this is the safest way to store bitcoins. Now, in 2017, with all the backdoor hacking stories, I would prefer using a variety of offline wallets (desktop, hardware, paper) to store my bitcoins. If you are comfortable with ensuring your PC’s security and/or using a Linux system (Windows is considered the least secure operating system) then this may be a relatively secure option for you. A desktop wallet could also be an option for keeping a certain percentage of your portfolio.

Here are the most secure desktop wallets:

Electrum – most popular desktop wallet because of simplicity. Users have to write down a seed when creating their wallet. Can be integrated with the Trezor or Ledger hardware wallets.

Exodus – also very simple to use within an in-built instant exchange (to swap between major altcoins). Popularity for this wallet has been growing significantly. I noticed that Exodus gained many new users after Multibit wallet shut down (developers ceased maintaining their product).

Armory – a very secure and feature-laden desktop wallet for advanced users. Offline signing options make this extra secure. Note: this wallet requires BitcoinCore to function. Bitcoin Core is the original Bitcoin desktop wallet, but it needs to download the whole blockchain (>100GB large!) to work. I have not listed Bitcoin Core here for this reason.

Hardware Wallets

Hardware wallets are very sophisticated semi-cold storage (mostly offline) systems. A piece of hardware is used to store the private keys to your bitcoins. Every time you want to send coins then you’ll just connect the hardware wallet to a PC and then take it offline again once the transaction is complete. Keep in mind that you have to buy hardware wallets, unlike the other types of storage solutions which are mostly free. Although you still have to trust the hardware-wallet manufacturer & suppliers, many people claim that this is the safest type of bitcoin wallet.

These are the most popular hardware wallets:

Ledger Nano – has a screen yet is priced cheapest. Most popular hardware wallet.

Trezor – easy to use for beginners, nice user interface. More expensive than the Ledger Nano

Note: some experts suggest that hardware wallets are not real cold storage (completely offline) because they require USB connections to make transactions.

Paper Wallets

I feel that using a paper wallet is the most secure cold-storage solution (more so than hardware wallets). With a paper wallet you only have to trust the wallet-creating software and the physical location that it will be stored in (usually a safe in a bank or at home). As with all super-secure solutions, this is the least convenient as you’ll need to create a new paper wallet every time that you want to send bitcoins somewhere. If you are planning to hold on to your cryptocurrency for a long time without spending it, a paper wallet could be a super-safe option for you.

Bitaddress – is a client side paper wallet generator. It’s open-source and written in Javascript.

Note: I no longer recommend paper wallets to beginners. Such storage systems may seem safe at first glance, but you need to be careful how you create, print, and spend your paper wallet bitcoins.

It is still possible for beginners to have a paper storage system. Simply write down your desktop wallet recovery phrase on paper – voila!

Blockchain Wallets

Seen as the next generation of crypto wallets, blockchain-based apps provide a holistic approach to storing coins and keys. One of the main players in the blockchain crypto wallet market is eToro USA. Through its subsidiary eToroX, this trading platform gives customers the ability to buy digital tokens and store them in a preparatory wallet. Indeed, since going live in 32 US states in the first quarter of 2019, eToro USA has been forced to abide by local regulations. This means it can’t offer crypto-based contracts for difference (CFD) in the same way it does in Europe.

To counter this and improve its service, eToroX allows users to buy the underlying asset of 13 cryptos, including Bitcoin (BTC), Ethereum (ETH), Ripple (XRP) and more. From this, users with Gold accounts or better can use the eToro US wallet. Available for iOS and Android devices, Gold+ users can send digital tokens to/from their accounts (limited to amounts they’ve initially deposited via wire transfer – the minimum deposit is $500). Alongside the platform’s social trading feature that allows users to follow the trades of experts, eToroX wallet accepts multiple coins. This means you can use a single storage point for all your eToro investments.

However, the reason this wallet stands out is its blockchain base. Once you create an account, you’ll receive a personal blockchain address. This allows you to make speedy on-chain transactions and, more importantly, it acts as a store for your private key. In practice, this ensures your key is 100% safe and, moreover, you never have to worry about losing it. For novice users, this holistic solution is one of the easiest ways to move tokens to and from an exchange.

Multi-signature Wallets

Most bitcoin wallets simply need one private key signature to make a transaction. Multi-signature wallets require multiple private key signatures to make a transaction. For example, if you wanted to send bitcoin you would first need to authorize the transaction, and then another trusted person would also need to authorize it. Neither you nor the other person can make a transaction on your own. Both parties require the other’s consent (signing) to make a transaction. This allows for some pretty advanced features and very safe storage solutions. This type of wallet is great for business using bitcoin.

Multi-signature capabilities are sometimes available in web, smartphone, desktop, and hardware wallets.

These are the best wallets for multi-sig capabilities:

CarbonWallet, Coinbase, or Block.io (web-wallets)

Blocktrail, CoinKite, Copay, GreenAddress (mobile wallets)

Electrum or Armoury (desktop wallets)

Hot vs Cold Wallets

The terms “hot” and “cold” are used to describe the online connectivity of a bitcoin wallet, and by extension, its risk factor. Here is the difference between the two:

A hot wallet is constantly connected to the internet with the private keys loaded ready for use. For this reason a hot wallet is riskier because a hacker can theoretically access the private keys if they find a vulnerability. Sometimes I hear people use the term “online wallet” interchangeably with “hot wallet”. Hot wallets make it easy to do transactions quickly and on the go. Web, smartphone, and, to a certain extent, desktop wallets can all be considered “hot” wallets.

A cold wallet is not connected to the internet and the private keys are offline. Sometimes I hear people use the term “offline wallet” interchangeably with “cold wallet”. Cold wallets are therefore safer because hackers would have a very hard time accessing your private keys. Some cold wallet systems need to connect in order for transactions to be made. Others allow transactions to be signed completely offline and subsequently broadcast it to the bitcoin network (without connecting the private keys). Hardware (USB) and paper wallets are popular cold wallet systems.

The term “warm wallet” is occasionally used by experts when describing cold wallet systems that must connect to the internet to make transactions (most hardware wallets must do this). A warm wallet can be defined as a mix between a cold wallet and a hot wallet. Warm wallets are therefore not as safe as pure “cold” wallet systems, but they offer some conveniences of a “hot” wallet.

How is it that some people always use the most trustworthy & sound bitcoin exchanges – while others get trapped with poor-quality insecure platforms? From the slow collapse of Cryptsy altcoin exchange to the never-ending MtGox fiasco – there are some important lessons that everyone can learn. Indeed, knowing the factors that qualify a good cryptocurrency exchange v.s. a bad one is like knowing which banks can be trusted and which cannot.

Recommended place to trade Bitcoin

Commissions & Fees

No one likes to get over-charged. Paying the cheapest fees is always important. Some exchanges are very transparent about how much you will pay to deposit, buy, sell, store, and withdraw. However, other places are more discreet about how they extract fees from your hard earned money.

Some sneaky fees to look out for are:

Monthly “wallet fees” for keeping cryptocurrency on the exchange. Everyone knows there is no incremental cost to “managing” a bitcoin address – regardless of how much it contains. Imagine if supermarkets decided to charge people hourly fees for using trolleys.

Excessively large bitcoin withdraw fees. The operators my try to justify such fees with terms like “transaction backlogs”, “blockchain bloat”, or “mempool overload”.

Verification admin charge. Nobody should have to pay to get their ID verified. Exchange are obliged to submit everyone to vetting.

Excessive deposit fees. Realistically exchanges get charged by their banks anywhere between 1 – 10 usd when you deposit money (less for SEPA transactions) in their accounts.

Most sites make their revenue by having a small margin on the buy/sell rate. Do look into commissions before you deposit money anywhere.

Payment Methods

Why would deposit methods influence the ranking of an exchange? Simply because when customers have decided to trust a certain place, they tend to stick to the same site. Such behavior means that customers prefer to have a range of choice for depositing and withdrawing fiat/crypto. If there is not enough options then customers have to research alternative sites – and this takes time!

I’m yet to find a site that accepts all four of the most-used payment methods:

Most places will accept either one or two. For example, the three largest exchanges accept both bank transfer and credit card deposits.

Ease of Use

It is funny that some sites are still, in 2017, so hard to use. Sometimes I think that the creators actually asked themselves: “how can we make this as hard as possible for new users to understand…?”. It is really important to start off simple. Don’t try use a decentralized exchange if this is your first day on bitcoin. Choose a site which accommodates beginners.

Try to avoid trading sites that have:

Multiple & extended down-times. No point signing up if you can’t access the web server.

Non-intuitive user-interfaces. Having to look up support for each trade will quickly get frustrating.

Non automated withdraw processes. Users must not need to ask for permission to take out their money.

Some of the leading exchange sites are actually very easy to use, but also offer more advanced features for experts.

Security

If you are new to bitcoin, you may have heard mainstream media reports about how “bitcoin was hacked” or something similar. Thankfully you have gotten this far & ignored the prophecies of incompetent journalists. What actually happens is that bitcoin exchanges do themselves get hacked. This has nothing to do with bitcoin the protocol – which remains incredibly secure and has never been compromised since its creation (Edit: redditor /u/dooglus correctly points out this overflow incident in the early days of bitcoin). So it is indeed important to choose an exchange with good security.

Some indicators that an exchange is following security best practices are:

the exchange offers and encourages customers to use two-factor authentication

the operators resist and reason with regulator demands on how the exchange should be run.

Some indicators that an exchange may have been compromised are:

a long & persistent backlog of bitcoin withdrawls (users waiting days to receive withdrawls)

an increasingly large difference in the quoted price of bitcoin compared to other exchanges

media allegations of theft. Coindesk.com is a reputable source for bitcoin news.

silence from operators who may stop responding to community questions/allegations

Rest assured, most people simply withdraw their coins to an offline wallet once purchased. That way you no longer need to worry about how safe the exchange is, because you now have sole control over the private keys.

Customer Service

It’s good to research each site’s customer service records before depositing. Some places are really fast to respond to customer queries, while others may take days to get back to you. Keep in mind that you will necessarily be interacting with support at some stage as most sites now require ID vetting. This stage usually involves several emails, so it’s important that the site has employed enough agents to respond to users in time.

As exchanges get more sophisticated and secure, some have developed account-flagging systems which may temporarily freeze users’ funds. Flags can be set off for a variety of reasons, but usually get sorted once you reach out to a customer support representative.

Community interaction

This aspect should be given more weight. After all, the bitcoin community is a thriving eco-system. Exchanges don’t exist in a void, and those that are reaping all reward without giving something back really don’t deserve your custom.

Good examples of community interaction include:

participating & solving queries on bitcoin forums, notably the /r/bitcoin sub-Reddit. Localbitcoins & CEX are very active in this area.

being as open-source as possible. Sharing and taking innovation from the community. Poloniex, the largest cryptocurrency exchange, has a lot of open-sourced front-end code & a great API (a public interface for programmers to build their own apps on top).

remaining positive & professional. Bitcoin has a lot of scandal, emotion, & controversy. Those that refrain from slander get my appraisal. US-based exchange Gemini has played their cards right by staying neutral throughout the block-size debate (an extended disagreement within the community over how the bitcoin code should evolve).

What other factors make an exchange meet or miss industry standards? You can let the community know by leaving a comment below.

Recommended places to trade Bitcoin

You may have heard that getting bitcoin is difficult because a PC must mine them first. Such statements are no longer true.

In 2017 it is now possible to purchase bitcoin directly. From credit cards to bank transfers, from cash to PayPal – there is no shortage of payment methods for buying. Each method will have its associated inconveniences and strengths.

Speed to deposit, commissions, ease-of-use, degree of anonymity, fungibility, proximity, and security – are all important factors when choosing a deposit method.

Recommended place to buy bitcoin

Here is a summary table of the advantages/disadvantages for each payment method:

Payment Method

Fees

Anonymity

Speed

Difficulty

Credit Card

High

Bad

Very fast

Easy

Bank Transfer

Very low

Bad

Slow

Easy/Medium

PayPal

Very high

Good

Fast

Medium

Cash

Low

Excellent

Slow

Medium

Work for it

No fees

Good

Slow

Hard

You can also find out which of these top bitcoin exchanges facilitate deposits with your preferred payment method. In the next section I’ll examine each type of payment method. You should get a good idea which one will suit best for your purchase.

Bank Transfer vs Credit Card

For buying large amounts of bitcoin, you should choose to buy with a bank transfer on a reputable exchange. Fees are always lowest when you choose to transfer funds directly via SEPA (Europe) or Wire (US). Alternatively credit card purchases will provide you with bitcoins in a much faster time span. This is because deposits are verified instantly so the exchange can immediately release the cryptocurrency to you. The downside is that credit card transactions entail larger fees, which make it inconvenient for getting many bitcoins.

PayPal vs Credit Card

What makes people want to transfer PayPal to bitcoin and vice versa? The simple fact that PayPal is instant, ubiquitous, and quite convenient (Many people use it as their favorite payment processor). Using PayPal is great for small amounts, but it’s far cheaper to use other payment methods (credit card, bank transfer) for larger transactions. Credit card purchases are the simplest way. Fees are high, but generally not as high as when buying with PayPal. Be aware that not many PayPal to bitcoin exchanges exist and therefore some places may take advantage of this. Be sure to read the differences between a good and a bad crypto trading site before commiting your funds.

Use the following diagram to compare PayPal vs Credit Card for buying BTC:

Cash (in-person) vs Buying Online

There are two accepted ways to buy bitcoin with cash:

Using a Bitcoin ATM – you put cash in, it sends bitcoins to your specified address

Meeting a person and swapping your cash for their bitcoins

Generally speaking, buying bitcoins with cash will guarantee the highest levels of anonymity. Fees are higher than buying by bank transfer, but at least you will keep your ID secret and no one has to know who you are. Some people choose cash because they want to buy bitcoin with no ID, but for large transactions this become quite inconvenient, risky, and even physically dangerous. Another downside is that you usually have to go to physical location to meet someone, rather than just being able to do it all online. Please note that not all bitcoin ATMs are anonymous. Some do require ID submission.

Working for Bitcoin vs Buying it

Did you know that it is actually possible to work for bitcoin? It’s really starting to kick-off within the freelancing community. If you’re a graphic designer, web developer, artist, producer, or anything else that can be done remotely – then I highly recommend looking into working for bitcoin. There are no exchange fees, since your employer simply sends you his bitcoins directly to your address. Granted, this is not the fastest method, but you sure would be riding the first wave of trend-setting digital freelancers. I like to look for freelancing gigs on the xbtfreelancer site or the /r/Jobs4Bitcoins sub-Reddit.

Recommended places to buy bitcoin

What was your experience when choosing a deposit method for buying bitcoin? You can let the community know by leaving a comment below.

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